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Lectures on Economic History
Fudan University
December2009
Joel Mokyr
Northwestern University and
Tel Aviv University
[email protected]
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Lectures outline:
1.
2.
3.
4.
5.
6.
Economic Growth and the Industrial Revolution
Technology and Innovation, 1760-1850.
Agriculture and the Service Sectors
The open economy: International Trade and Empire
The demographic transition 1750-1850
Institutions and Government in the Industrial
Revolution.
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These lectures are based on:
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The two issues:
• The “big” question: The emergence of the
“convergence club” or “How the West
Grew Rich.”
This requires explaining the Industrial Revolution
in Europe, since it is clear that without it, modern
economic growth would not have happened.
• The “small” question: why did Britain
lead?
This requires saying something about British
“exceptionalism.”
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Keeping these two arguments separate will help
clarify our thinking about causes
• Some arguments purport to explain “Britain”
but not “the West” (e.g., British coal, its
overseas Empire, the successful revolution of
1688 and the establishment of Parliamentary
rule).
• Some arguments purport to explain the West
but not specifically Britain (e.g., “modern
science” or “protestant ethic” or Europe’s
access to Ghost Acreage (e.g. Pomeranz)
• None of them explain the timing very well.
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Two observations on the Industrial
Revolution:
• Was it British? It was more of a joint multinational
“western” phenomenon that most scholars have
allowed for, including Britain, as well as much of
Western Europe, North America. British leadership
was important, but ephemeral and not indispensable.
• How critical were “the years of miracles”?
Technological progress in the West did not peter out
after 1800 or so, as clusters of macro-inventions had
done before. The “canonical” Industrial Revolution
was followed by a second round of micro-inventions
1815-50, then 2nd Industrial Revolution and so on.
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Standard causal stories about Britain:
1.
Geography and Resources: Britain has lots of coal and iron and is
an Island.
2.
Government: the Industrial Revolution required the “right” kind of
political regime.
3.
Demand: growing population and/or foreign markets “stimulated”
technological progress.
4.
Social factors: mobility provided the “right” kind of incentives.
5.
Religion: the “Protestant ethic”
6.
These and others are all problematic.
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Question to be addressed:
• Could changing beliefs and knowledge have affected the
course of the Industrial Revolution?
– “I am sure that the power of vested interests is vastly exaggerated
compared with the gradual encroachment of ideas .... soon or late, it
is ideas, not vested interests, which are dangerous for good or evil”
J.M. Keynes, GT, pp. 383-84.
– ”Ideology may perhaps be considered a random shock in a model of
institutional change, … but the absence of any positive theory of idea
formation or role for ideology leads us to support economizing activity
as the primary explanation for institutional change… Ideology may be
usefully be thought of as a ‘habit of mind’ originated and propelled by
relative costs and benefits. As an explanation for events or policies, it
is a grin without a cat.”
Ekelund and Tollison, 1997, pp. 17-18.
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Intellectual Factors in Economic
Development
Economists have shown a renewed interest in these factors.
• Culture: New interest in “cultural factors” that support growthenhancing institutions (Tabellini, 2006; Guiso-SapienzaZingales, 2006; Jones, 2005).
• Institutions: New Consensus following North and Weingast,
1989: (Greif, 2005; AJR, 2005; Rodrik et al, 2005): Institutions
central to the story, though not exactly clear how.
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Can we find an intellectual development
that can be argued to be “causal”?
• Oddly enough, the one candidate that has been proposed,
the scientific revolution of the seventeenth century, has
been dismissed by most scholars since it seems that
science was not much involved in most of the early
inventions.
• This may have been a bit premature (e.g. Jacob and
Stewart, 2005).
• But it may not satisfy most who do not find it convincing
because the best-known technological breakthroughs of the
Industrial Revolution were not science-dependent.
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So we need:
• Something that prevented the Industrial
Revolution in the West from fizzling out, yet
was widespread in the countries that by 1914
were the core of the convergence club.
• In other words, find something that:
– Occurred before the Industrial Revolution
or contemporaneous with its early stages.
– Was specific to the West but not just to
Britain.
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• What could that be?
• Answer:
The European Enlightenment
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There are different definitions of the Enlightenment.
Most people tend to agree that it was:
• An Intellectual Movement, that is, an elite
phenomenon.
• Fundamentally secular and “cosmopolitan.”
• Spanned about a century: 1680-1789 and
affected much bit not all of Europe, though to
different degrees.
• Shared certain principles despite important
local variations.
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Not everything about the Enlightenment
mattered for economic growth
• But many things did. Above all:
– The belief that progress (including economic
growth) was both possible and desirable.
– That it was the responsibility of intellectuals
to help bring it about.
– The astonishing thing is that Enlightenment
philosophers, much like Karl Marx (11th
thesis on Feuerbach), were able not only to
interpret the world, but to change it.
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Two striking things about the Enlightenment as
an explanation of modern economic growth
• It “works” in time series, in that it takes
place before and during the early stages of
the Industrial Revolution. May not explain
the “onset” --- but what counts is the post
1800 stage.
• It “works” in cross-section in that practically
all the “convergence club” countries in 1914
were countries that were demonstrably
affected by the Enlightenment.
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Indicators of Economic progress by the late 19th C.
(Weighted averages. Sources: the usual suspects)
GDP per capita
(1990 prices),
1913
Level of
urbanization
(% in large
cities) . 1900
% Male
Illiteracy c.
1900
% Labor in
“commerce” in
1888
per capita
“industrializ.”
(Bairoch index
numbers for
1900, G-B in
1900 = 100)
“Enlightened”
(UK, France,
Germany,
Benelux,
Scandin.,
Switzerland)
3,924
52.5
5.3
10.8
86
“Semienlightened”
(Aus-Hung,
Italy, Ireland,
Poland)
2,303
40.0
40.6
8.6
28
“Unenlightened
” (Balkan,
Iberia, Russia)
1,525
16.2
50.3
4.9
20
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Moreover:
• Nothing like the European Enlightenment
can be discerned outside of the areas of the
Industrial Revolution (China, Middle East,
Africa), it was successfully resisted in Spain,
Russia.
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So how come economic historians
have “missed” it?
• One answer: a lot or scholars still believe that
ideology is endogenous to material conditions or
demand (“historical materialism”).
• Another answer: most historians have believed that
the Industrial Revolution was purely British and the
Enlightenment was mostly French (both of these
propositions are inaccurate).
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The importance of being persuasive
• Ideas “compete” in the market for acceptance and
influence.
• But traditionally this market had been heavily controlled by
vested interests (orthodoxy fighting against “heretics”).
• By 1680 or so, this is widely realized to be impracticable
except for some rear-guard skirmishes.
• This gives enlightenment philosophes their chance to
compete on a level playing field.
• In short, what this was about was persuasion. And
Enlightenment thinkers were quite persuasive.
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Belief in Progress: becomes the hallmark
of the Enlightenment
• “The same age, which produces great philosophers and politicians,
renowned generals and poets, usually abounds with skilful weavers,
and ship-carpenters. We cannot reasonably expect, that a piece of
woollen cloth will be wrought to perfection in a nation, which is
ignorant of astronomy, or where ethics are neglected. The spirit of the
age affects all the arts; and the minds of men, being once roused from
their lethargy, and put into a fermentation, turn themselves on all
sides, and carry improvements into every art and science.”
David Hume, 1742
“All
things (and particularly whatever depends on science) have of
late years been in a quicker progress toward perfection than ever...in
spite of all the fetters we can lay upon the human mind... knowledge of
all kinds ... will increase. The wisdom of one generation will ever be the
folly of the next.”
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Joseph Priestley, 1771
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Enlightenment thinkers went further:
• They formulated principles and policies as to how
material progress (economic growth) could be
achieved. These involved two basic agendas:
– Useful knowledge should be deployed to increase
productivity and efficiency:
(The Industrial Enlightenment).
– Institutions (social and political) should be reformed
rationally to make society more efficient (The
Institutional Enlightenment --- will talk about it only if
time).
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The Industrial Enlightenment was only the
most successful. For instance:
• One could speak of an agricultural enlightenment, with
many attempts at improvements in the technological
and organization aspects of farming (e.g. the Dishley Society,
founded in 1783, and the Smithfield Club, founded in 1798, specialized in the
breeding and raising of animals; Board of agriculture, f. 1793).
• A medical enlightenment: the search for improved
clinical care and prevention. (e.g., scurvy prevention (Lind);
smallpox inoculation (Jurin) and vaccination (Jenner); use of medical
statistics)
These efforts were less successful than the industrial
Enlightenment at first, but not for lack of trying. The
issues were just difficult.
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The first part of this story:
•
“Baconian program” for changing the
accumulation and dissemination of useful
knowledge became a core element of the
enlightenment. Four components (for
details see Mokyr, 2002, 2005, 2007):
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Francis Bacon, 1561-1626
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Expansion of the useful knowledge base of
technology during the Enlightenment
1. Changed Agenda of research
2. Improved Capabilities of Natural
philosophers
3. Different selection mechanism in the
“market for ideas”
4. More effective diffusion mechanisms
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1. Agenda:
• Natural philosophers, under the influence of Bacon, in
the 18th Century increasingly begin to investigate things
that might be useful to manufacturers.
• Part of the reason is purely economic: changing
patronage (central government and industrialists who
hired scientists as consultants rather than rich nobility
who wanted to show off; students who were
increasingly demanding to learn things that might be
useful).
• Part of it is cultural: the enlightenment changed the
priorities of natural philosophers and made them more
secular and materialistic. Belief in progress was central.
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The importance of scientists (more than
“science”) at the service of production
– Mathematics: many mathematicians apply themselves to
help solve practical problems (e.g. Euler, Borda, McLaurin).
– Chemistry: Much research in the direction of solving
problems encountered by manufacturers in bleaching,
dyeing etc. (Priestley, Cullen, Berthollet).
– Botany and Physiology: attempts to use the results to
improve farming and livestock (Linnaeus, Duhamel)
– Physics: a great deal of hope to understand and control
electricity (Musschenbroek, Franklin, Aepinus) and water
power (Parent, Smeaton, Borda, Poncelet) using theory and
experiments.
– Material science: famous 1786 paper by Berthollet, Monge
and Vandermonde about the nature of steel.
– Overall, many of the “great minds” from Leibniz to Lavoisier
applied some of their time to solve practical problems.
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Moreover, scientific method and culture
affected technology more than science itself
1.
2.
3.
4.
5.
Widespread use of mathematics
More sophisticated experimental techniques
Stress accuracy and communicability
Insistence on reproducibility
Communicate results and place them in the public
realm (“Public Science”).
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One Example of a typical “Enlightenment
Man”: René Réaumur, 1683-1757
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Contributed to many technological fields:
President of the Académie Royale but also
interested in:
• Iron and Steel (first to suggest the chemical
properties of steel)
• Porcelain and glazing
• Egg incubation
• Entomology and pests
• Meteorology and temperature measurement
• Showed the feasibility of glass fibers
• Suggested paper to be made from wood
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Another example (from Britain):
•John Robison (1739–1805), closely associated
with Joseph Black and James Watt.
•Mathematician and chemist, appointed lecturer in
chemistry at the University of Glasgow in 1766.
•Later taught mathematics at Kronstadt in Russia
and then professor of natural philosophy at
Edinburgh.
•Worked closely with Watt and contributed to the
development of the steam engine and to the
mathematical study of electricity.
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Joseph Priestley, 1733-1804
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Joseph Priestley
Great scientist (discovered Oxygen and helped lay
foundation of an understanding of combustion and heat.
.
Inventor (among others, carbonated water).
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Typical of “English Enlightenment”
 Follower of Bacon’s doctrines, scientific pursuits are





consistent with the commercial and entrepreneurial
interests of his middle class.
Progressive Enlightenment philosopher, ended up
fleeing to the US in 1794.
Deeply religious man but advocating a liberal,
humanistic form of dissenting religion, sympathetic to
French Revolution.
Responsible for major advances in the chemistry of
gases and experimental methods, discovered oxygen.
Hung out with other famous scientists and
businessmen at the Lunar Society in Birmingham.
Also made some significant inventions, above all
invented carbonated water (commercially exploited by
a Swiss emigrant name Johann-Jacob Schweppes).
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Did all this lead to the
Industrial Revolution?
• Answer: Things are not quite that simple.
• Not all of the famous inventions of the
Industrial Revolution required a lot of
science.
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2. Capabilities
• Technology leads to better science as
much as the other way around (Derek
Price)
– Better tools and instruments led to better
research.
– Advances in mathematics (especially calculus).
– Advances in experimental methods (e.g.
Smeaton, Cavendish, Laplace).
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One example: Alessandro Volta, 1745-1827
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Volta’s “pile” (1800)
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3. Selection
• Selection among competing theories and views:
– Increasingly based on experience and evidence and
not authority (”nullius in verba”). (classic examples:
defeat of the phlogistonists, decline of perpetuum
mobile research).
– “Peer-reviewed” high-quality scientific periodicals
(e.g., Nicholson’s Journal or François Rozier’s
Observations sur les Physique…)
– Less constrained by defending orthodox views or
metaphysical concerns.
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4. Diffusion: reduce “access costs.”
• Vertical movement of knowledge: the need
to build bridges between savants and
fabricants, the world of “natural
philosophy” and “useful arts.” Moves both
up and down.
• Horizontal movement of knowledge:
dissemination of both scientific and
artisanal knowledge, across regions and
across time.
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Source: Peter Clark, 2000, p. 132
1200
1000
800
600
400
200
0
1640-49
1660-69
1680-89
1700-09
1720-2
1740-49
9
1760-69
1780-89
England
Scotland
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“Society of Dilettanti” 1777-79
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Meeting of the Society of Arts, 1809
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Some of these pre-date the age of
Enlightenment
• The idea of “open science” may be the most important
institutional foundation of the growth of useful
knowledge.
• Transnational “republic of letters” emerges in the
seventeenth century. “Sciences are never at War” [?]
• Enlightenment projects are all about communication
and diffusion, e.g. academic societies, encyclopedias,
books about technology (dictionaries, compendia) and
useful knowledge. This involves both codifiable and
tacit knowledge.
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One (less well-known) of an eighteenth century
mechanism to diffuse useful knowledge:
• The multi-edited compilation of
alphabetically arranged technical and
scientific subjects.
• Often heavily plagiarized or at least
derivative.
• But inexpensive, accessible, and popular.
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The great irony:
• In the short run the Baconian program did not work very well and it is
hard to credit it with the first wave of early inventions of the Industrial
Revolution.
• Most “promises” of mathematics, chemistry, mechanics, and biology
before 1800 disappointed (with a few notable exceptions).
• Why? Scientists did not know enough, or knew many things “that ain’t
so.” The world was more messy and complex than they had imagined.
• People knew what worked, but not why. Did not understand underlying
principles (“narrow epistemic base”) New techniques limited also by
workmanship, materials, tools.
• BUT: Faith that investment in useful knowledge would pay off persisted.
Research methodology, practical methods, and tools of science were
more important for technology than actual content.
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In the longer run…
• This optimism paid off enormously. Between 1815 and 1860
(before the so-called 2nd Industrial Revolution), useful knowledge
started to affect production in a host of industries. The result was:
– Continued technological progress in a host of industries rather
than stagnation (e.g. iron industry, improved steam engines,
improved power-loom, self-acting mule).
– New applications and adaptations of existing techniques (e.g.,
adaptation of mechanized methods used in cotton and worsteds
to linen and wool).
– Recombinations of existing techniques into new forms (e.g.
steamships, railroads).
– The emergence of wholly new techniques based on new useful
knowledge (e.g. telegraph, food preservation, mining technology,
Fourneyron’s turbine; Chevreul’s work on fatty acids;
Bessemer’s steelmaking converters).
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In explaining the emergence of modern
growth…
• Was technology enough? Did institutions
matter?
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The second part of the story: the
Institutional Enlightenment
• Institutional Reform. The enlightenment fostered growing belief in liberal
values such as free trade, labor mobility, free entry, occupational choice.
These values did not disappear in 1789 but remained part of the liberal
creed.
• But there was also recognition of the need to solve coordination
problems such as standardization and deal with other “market failures.”
• The enlightenment view of economic institutions was based on the
growing realization that the economic game is not zero sum and that
rent-seeking (redistribution) is actually negative-sum (“leaking bucket”).
• Reaction against mercantilism: Realization that the equation wealth =
military power is not a truism but based on a self-fulfilling expectation.
• Culminates in Wealth of Nations. But many antecedents.
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The main target of reforms was not protectionism as
such, or unfair taxation, or awkward legal systems
• It was primarily about rent-seeking; Mercantilist
society was about rent-seeking and redistribution
through monopolies, privileges, and constraints on
mobility and freedom of choice.
• The Enlightenment realized intuitively what modern
economics (e.g., Baumol, 2002; Murphy, Shleifer,
and Vishny, 1991; Prescott and Parente, 2001) has
pointed out: rent-seeking activities will seriously
impede economic efficiency and growth.
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Among reforms advocated by
Enlightenment writers:
• Eliminate exclusionary rents generated by
monopolies and guilds.
• Eliminate rent-seeking through price controls
(especially grains).
• Reform the tax system.
• Free both external and internal trade.
• Rationalize market system to reduce transaction
costs and solve coordination problems (legal
reform; weights and measures).
• Unfettered occupational choice and free Lmarkets.
• Stop predatory wars (at least within Europe).
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Will return to this issue in the last lecture in some more
detail.
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How does this relate to technological progress?
• Had there been technological progress but
no institutional reform, the gains from
productivity growth would have been
expropriated by corrupt elites or wasted
on military adventures, and the process
would have ended.
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Had there been institutional reform but no technological
progress, the process of growth would have continued for a
while through gains from trade and better allocation of
resources, but would have inevitably run into diminishing
returns and fizzled out.
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• In that sense, the Enlightenment gave
Europe two complementary innovations.
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The intellectuals convinced policy-makers
• Not without many setbacks and reversals
(wars of 1793-1815 get in the way).
• By 1820, much of this program is launched
and completed in four decades, and it
brings about sustained growth until 1914
(despite a resurgence of rent-seeking after
1880).
• This only happens in the set of countries
that were “enlightened,” which more or less
coincides with the “convergence club”.
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By 1870 or so:
• Most of the economies that were about to
constitute the convergence club had
reduced internal rent-seeking.
• The Pax Britannica minimized predatory
wars and the need to spend large amount
of resources on the military.
[after that, the influence of liberalism starts to decline, but that
is another story…]
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Uneven effect of the Enlightenment
• The American Revolution created a Republic
that in many ways was inspired by
Enlightenment ideals.
• The French revolution in the end evolved into
something very different and created a
reactionary backlash that tried to set the clock
back.
• At the same time it swept away much of the
resistance to Enlightenment reforms, preparing
the ground for a “liberal economy.”
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So WHY did Europe have an
Enlightenment?
“Free” marketplace for ideas.
• Europe in 16th and 17th centuries had fragmented and
decentralized politics but increasingly unified markets for
new ideas.
• This means incentives for innovations are high, possible
penalties (relatively) low.
• Empirical implication: footloose intellectuals.
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The harder question:
• Why was the Enlightenment successful in Europe?
Combination of suitable economic circumstances
and competence of the leading figures.
• Rise of an urban bourgeoisie contributed to the
triumph of enlightenment ideals.
• But it did not have to turn out this way. Eighteenth
century China was equally “commercialized.”
• Economists need to realize how contingent
economic history has been. No “inexorable” force.
• Beware of hindsight bias.
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Why were enlightenment ideas
eventually victorious?
• Economic interests supported them – here and there (but others
opposed).
• Fragmentation of political power in Europe makes suppression
very difficult while markets for knowledge were transnational
and quite unified.
• Persuasion and rhetoric were powerful. Organized in formal
academies, friendly societies, salons, coffee houses, masonic
lodges etc.
• Many Enlightenment leaders were part of the political
establishment (Peter Gay’s “insider” argument.). Yet when they
were not, they could play different powers against one another.
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Query: why did Europe have an Enlightenment
and others did not?
• China did have some kind of embryonic Enlightenment after
the 1644 revolution, but it did not have palpable economic
results.
• China in Q’ing (Manchu) period 1644-1912, highly
commercialized, monetized, reasonably good property rights.
• Kaozheng movement on the surface had many of the
potential effects of the European Enlightenment. Yet it did
not bring about any technological changes. WHY? One
possible reason: it was suppressed by the Central bureaucracy
as subversive and rebellious.
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By way of summing-up: Counterfactuals:
1. Had Europe had only institutional Enlightenment
and no industrial Enlightenment, it would have
looked more like China.
2. Had Europe had only industrial Enlightenment and
no institutional Enlightenment, it may have looked
(a little) like Latin America or Russia.
But it had BOTH, hence it could progress after
1815.
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